In the early 2010s, Greece was reeling from austerity measures imposed under its bailout. Hundreds of billions of euros in loans from eurozone governments and the IMF, with Germany as the largest creditor. Whether this so-called bailout was fair or in the interest of the Greek people is a separate matter. Around this time, a story about Greek economic resistance began making the rounds.
In the spring of 2010, just as the first bailout was being finalized, the Greek government announced a new crackdown on the country’s rampant tax evasion. The sweeping new tax code and its related investigations unearthed a smorgasbord of financial improprieties. One peculiarity that came to light was the official count of swimming pools in Athens. The Greek tax authority had long used pool ownership as a marker of wealth. At the risk of sinking into pedantry, this wasn't a standalone tax on pools but part of Greece's tekmiria system of imputed income. Greeks are taxed on the higher of two numbers: their declared income or the income the state presumes from their lifestyle.
One component of this lifestyle calculation was a simple heuristic: if you own a pool, you must have money. Greeks with a pool larger than 25 square meters were required to declare a minimum income, €11,600 for an outdoor pool or €17,400 for an indoor one.
There was just one catch. The tax was entirely assessed based on reported holdings. And the famously tax-avoidant residents of Athens simply forgot to mention their pools in all official documents. In fact, the total number of pools reported in the wealthy northern Athens suburbs was 324—compared to the 16,974 pools later revealed by satellite imagery.
To the Greek tax investigators and their new foreign austerity czars, this was an obvious and somewhat clumsy dodge, and Greeks must be made to pay their dues. Their answer was simple: it’s quite difficult to hide a swimming pool. Aerial photographs and satellite imagery (or even just a stroll through Athens’ more affluent neighborhoods) revealed the scope of the gambit. Self reporting had a compliance rate under two percent. The jig was up. The city’s aquatic upper class could (and would) be required to pay the full cost of pool ownership, and the EU was a few euros closer to recouping its loans.
When called on their dodge, Athenians realized that there was a price to pay. Yet very little new revenue trickled in, from pools or otherwise. An estimated €10 billion in taxes went uncollected annually, with total evasion running at 3–4% of GDP. (Had this missing revenue been collected, it would have erased nearly half the country's deficit.) When faced with the choice of paying the German piper or furthering the gambit, Greeks chose the latter. Pool owners simply determined that as long as their pool wasn’t visible from the air or the street, they would remain free from the long arm of the revenue service.
When the media began reporting that the government was using Google Earth images to hunt tax cheats, sales of large tarps and other pool camouflage systems boomed in Athens.
For many—though certainly not all—pool owners, paying large sums of money to disguise their contraband was preferable to giving another cent to the tax authorities. The new tax collectors failed to account for the economic culture. For a Greek, to pay his taxes is sacrilege. Not due to some innate Ayn Randian libertarian tendencies, but a socio-economic failure running so deep that few Greeks likely felt it consciously.
Greeks of all income levels were afflicted by a sort of “tragedy of the tragedy of the commons,” in which a society becomes increasingly low trust due to perceived widespread abuses of public resources or social systems. If my neighbor isn’t paying his income tax, why should I pay mine? Antisocial behavior is compounded by the human desire to avoid feeling like a rube.
This kind of conditional free-riding is driven by fear of the “sucker’s payoff”: the reward earned by an upstanding citizen for doing the right thing in an increasingly corrupted system. In the prisoner’s dilemma, this is the worst outcome on the board. Momentum builds quickly; as the rate of social adherence decreases, the per-capita cost borne by those doing the right thing increases sharply.
The Athenian pool owners rightly recognized that they were playing a sucker’s game. In a social system that failed to punish—or even recognize—tax avoidance, the honest man paid for his neighbor’s pool. The state itself all but sanctioned this behavior. When French authorities handed the government a list of thousands of Greek-controlled shady Swiss bank accounts, no one lifted a finger.
It was easy to write off this behavior as just another example of the lawlessness and lack of individual responsibility that led to the collapse of the Greek financial system. And many did. But there was something darker lurking under the surface. Silently, and over the course of decades, Greece had slipped into a state of low trust. While individuals surely still saw themselves as bending towards honesty, justice and kindness, impressions of their neighbors soured. And when the average citizen deems his average neighbor untrustworthy and fully self-interested, the sucker's reward becomes the expected payout.
Maybe we can blame the colonels and their post-autocratic fallout; maybe it’s the legacy of the avarice and blatant disregard for social welfare practiced by Aristotle Onassis and his ilk. (Ironically, the international shipping fortunes these magnates earned were fully sheltered from Greek taxes by a statute written in 1967—the junta's first year.) Either way, the result was the same: a country blanked by a layer of quiet mistrust and fear that in any interaction, you could be drawing the short straw. It bred a generation of hyper-vigilant citizens, always on the lookout for grift, and determined that they would not be the sucker.
The swimming pool camouflage systems basically sell themselves in this social environment.
There is a broader truth buried in this particular Greek tragedy. The "race to the bottom" is an unavoidable symptom and compounder of lower trust societies. Greek tax compliance has measurably improved in the years since, though I question whether this reflects a true cultural shift or simply the result of improved detection via electronic receipts, mandatory card payments, and the broader digitization of the economy.
Meanwhile, with fewer common bonds (and the social accountability that comes with them) and increased pressure to "get yours" before sinking into the permanent underclass, trust feels to be at an all-time low. It's no wonder that we've seen a rise of the grift. We feel it in crypto rug-pullers, venture-backed con artists and the thousand-and-one smaller acts of pulling one over. Regardless of the scale, these perpetrators always demur: "if not me, someone else would have." And with every new instance, we lose a little more social trust—deepening our fear in every interaction: "am I the sucker?"